German Bund Futures Volatility Forecast (07/11/2010)

The volatility of the German Bund slightly increased but it remained below the 0.38% level highlighting what we stated the last week: if the TGARCH volatility keeps fluctuating within a narrow range it is likely that the uptrend is not over.

Nevertheless, we lately saw a drop in the market which was clearly provoked by the QE2 announcements.The interest rates figures did not change at all but we are sure that the correction was caused by the Fed because interest rates level could be easily forecasted by investors and traders.

The Bund Futures prices should increase since both the volatility and price seemed not to have too much twisted the main trend, hence, the volatility should go back to the 0.20% area unless the Fed or the BCE decide to change the rules of the game.

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